On the cards: Expansionary Budget with optimistic tax revenue rise

The Centre is likely to project a much more optimistic net tax revenue estimates for the financial year 2023-24 (FY24) in its upcoming Union Budget compared with the conservative estimates in the previous ones, paving the way for a possible expansionary Budget, Business Standard has learnt.

“The next Budget could be expansionary, in a manner which is not easily visible. The expenditure could be high because the projected tax revenue is likely to be high after two years of conservative estimates,” a senior government official said.

For the current financial year (FY23), the Centre’s net tax revenue Budget Estimate (BE) is Rs 19.35 trillion, just 9.6 per cent higher than the FY22 revised estimate (RE) of Rs 17.65 trillion (see chart). FY22 and FY23 saw much more conservative revenue growth projections compared to previous years, thus giving policymakers a cushion.

Net tax revenue for FY22 came in higher than budgeted and the same is expected for FY23, going by trends so far. The Centre’s gross tax collections for FY23 till October 8 stood at Rs 8.98 trillion, 23.8 per cent higher than collections for the same period last year.

Meanwhile, goods and services tax proceeds for September soared 26 per cent to Rs 1.47 trillion, on account of rising demand, higher rates, and greater tax compliance. Collections from the nationwide tax remained above the Rs 1.4-trillion mark for the seventh straight month, continuing to display very high buoyancy.

“There is no reason to believe that revenue will not be buoyant next year as well. Nominal GDP will be high due to inflation, GST revenues are very healthy, and strong economic activity will help direct and indirect taxes,” the official quoted above said.

A more optimistic tax revenue BE for FY24 compared with the two preceding years means there is expected to be a substantial expansion in the Centre’s outlay for its flagship schemes, welfare, rural and employment focused programmes and capital expenditure.

The 2023 Union Budget will be the last full Budget before the 2024 Lok Sabha elections; the 2024 February Budget will be an interim one.

Finance Minister Nirmala Sitharaman is expected to present the next Budget on February 1. Work has begun in earnest, as the announcements and numbers are being finalised. Sitharaman is expected to have her pre-Budget consultations with various stakeholders like industry bodies, farmer bodies, social sector representatives, economists and others from mid-November onwards.

Earlier this month, Sitharaman said the upcoming Budget will have to be “very carefully structured” in order to maintain growth momentum and reel in inflation, which she identified as the biggest challenge facing the Indian economy.

“Specifics (regarding what the upcoming Budget may contain) may be difficult at this stage because it’s a bit too early. But broadly, the growth priorities will be kept absolutely on top. Inflation concerns will have to be addressed. But then, how would you manage growth will be the natural question," she had said.